- Lender got inquiries from money managers about its practices
- Currency trader Mark Johnson arrested in New York last month
HSBC Holdings Plc Chief Executive Officer Stuart Gulliver said Europe’s largest bank didn’t lose any big clients or business after the arrest of one of its key traders in New York last month over an alleged front-running scheme.
The firm “had a number of inquiries from fund managers, asset managers and insurance companies” about its practices, Gulliver said in an interview. “There are none at the moment that continue to be concerned about the events that are related to the incident.”
Federal agents arrested Mark Johnson, the bank’s global head of foreign exchange cash trading, as he prepared to fly out of New York’s Kennedy airport for allegedly front-running a $3.5 billion currency transaction in 2011. HSBC had already probed the deal at the center of the controversy and found nothing improper and was surprised by his arrest, people familiar with the matter have said.
The U.S. also charged HSBC’s former head of currency trading in Europe, Stuart Scott, with involvement in the scheme.
The two traders allegedly conspired to take advantage of inside information about Cairn Energy Plc’s plans to sell part of its stake in an Indian subsidiary. HSBC was hired to trade about $3.5 billion in proceeds of the sale to pounds, and made about $8 million from the deal.
After Bloomberg reported in June 2013 that banks had been manipulating the $5.3 trillion-a-day foreign-exchange market, HSBC brought in lawyers to investigate its currency business. That led to the departure of several FX traders and resulted in the firm paying $618 million in fines to the U.K. Financial Conduct Authority and the U.S. Commodity Futures Trading Commission. Scott left the bank soon after the 2014 settlement.
HSBC has been under the supervision of an outside monitor it was required to hire in 2012 for five years as part of a deferred prosecution deal it struck with the U.S. Justice Department. HSBC has increased its compliance workforce to about 9,000 from 1,500 in 2010.